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holzman_tweedLet's be clear about something: Bush's doesn't want to give rich people big tax breaks (with chump change for the middle class, and less chump change for the poor) because he thinks it will stimulate the economy. Bush wants to give rich people big tax breaks because he's a rich people and he receives lots and lots of campaign contributions from other rich people.
The theory behind "tax breaks for the rich" as an economic stimulus is that when rich people pay less taxes, they go out and spend it on things that improve the economy, like hiring workers and increasing production and consumption.
The "President's" father coined the term "Voodoo Economics" to describe this theory.
It simply doesn't work this way. Rich people do not wake up in the morning and say, "It's a slow day, I'm flush, I think I'll go out and hire a bunch of those poor, unemployed people because I'm such a nice guy." Rich people wake up in the morning and say "There's a buttload of people clamoring to buy widgets. If I sell them widgets, I'll make a bundle." If they have cash on hand, they can spend cash on hand to make widgets. If they don't have cash on hand, they borrow it.
Remember, rich people are not like you and me. Banks like lending money to rich people. Banks like lending money to rich people so much that when rich people go broke, banks actively work with them to restructure the debt, since they stand to get paid back someday that way, whereas bankrupcy means they'll get pennies on the dollar. When you or I go broke, banks forclose, repossess, and issue bad credit warnings.
On the other hand, rich people also wake up in the morning and say, "Dang, there's a buttload of people who can't afford to buy widgets. I guess this ain't a good time to make lots of widgets. In fact, I should look at cutting back on the widgets I make now. If I get some extra cash, I'd better put it someplace where I can fall back on it if things go south. Burmuda has some interesting options right about now..."
Ergo, if you want to stimulate the economy, the way to do it is to increase demand rather than supply. I work for a Fortune 500 company. Supply is the bane of our existence. We hate supply. Supply is this thing that we spend money on and then have to pay good cash that could have been profit to put somewhere until demand comes along. In companies like mine, employee bonuses are often calculated based on how little supply we can keep lying around. Adding supply in hopes that demand will magickally appear to consume it is back-assward.
This is why Bush originally spun tax breaks for the rich as something that we could afford to do because we had all this budget surplus.
As Arlo might say, Remember the surplus?
It was only when Bush blew away the surplus that he did the bait-and-switch to make it out to be a stimulus.
Let's face the sad and horrible reality: The economy is fucked up. THe fucked-uppedness of the economy has three sources:
Which is to say:
There is no magickal fix. Trillions of dollars were sunk into the economy that are now gone. Yes, some of it is in swiss bank accounts belonging to malfeasant corporate executives, but lots of it was consumed by the malfeasant practise of using the investment money to shore up the fraudulent finances of the companies being mismanaged. It is irretrievably lost and lots of people are going to have to take a hit as a result.
In case you missed it, the people taking that hit are not the people who are getting the main benefit of the stimulus package, though they should be.
The theory behind "tax breaks for the rich" as an economic stimulus is that when rich people pay less taxes, they go out and spend it on things that improve the economy, like hiring workers and increasing production and consumption.
The "President's" father coined the term "Voodoo Economics" to describe this theory.
It simply doesn't work this way. Rich people do not wake up in the morning and say, "It's a slow day, I'm flush, I think I'll go out and hire a bunch of those poor, unemployed people because I'm such a nice guy." Rich people wake up in the morning and say "There's a buttload of people clamoring to buy widgets. If I sell them widgets, I'll make a bundle." If they have cash on hand, they can spend cash on hand to make widgets. If they don't have cash on hand, they borrow it.
Remember, rich people are not like you and me. Banks like lending money to rich people. Banks like lending money to rich people so much that when rich people go broke, banks actively work with them to restructure the debt, since they stand to get paid back someday that way, whereas bankrupcy means they'll get pennies on the dollar. When you or I go broke, banks forclose, repossess, and issue bad credit warnings.
On the other hand, rich people also wake up in the morning and say, "Dang, there's a buttload of people who can't afford to buy widgets. I guess this ain't a good time to make lots of widgets. In fact, I should look at cutting back on the widgets I make now. If I get some extra cash, I'd better put it someplace where I can fall back on it if things go south. Burmuda has some interesting options right about now..."
Ergo, if you want to stimulate the economy, the way to do it is to increase demand rather than supply. I work for a Fortune 500 company. Supply is the bane of our existence. We hate supply. Supply is this thing that we spend money on and then have to pay good cash that could have been profit to put somewhere until demand comes along. In companies like mine, employee bonuses are often calculated based on how little supply we can keep lying around. Adding supply in hopes that demand will magickally appear to consume it is back-assward.
This is why Bush originally spun tax breaks for the rich as something that we could afford to do because we had all this budget surplus.
As Arlo might say, Remember the surplus?
It was only when Bush blew away the surplus that he did the bait-and-switch to make it out to be a stimulus.
Let's face the sad and horrible reality: The economy is fucked up. THe fucked-uppedness of the economy has three sources:
- The bursting of the dotcom bubble, which is to say the predictable result of sinking trillions of business dollars into business ventures that did not operate within sound (or even shaky) business practises.
- The trading that took place based on "misstatements" of company values and revenues.
- The destruction of the most expensive real estate in the world.
Which is to say:
- Financial nonfeasance on the part of investors.
- Financial malfeasance on the part of corporate executives.
- War.
There is no magickal fix. Trillions of dollars were sunk into the economy that are now gone. Yes, some of it is in swiss bank accounts belonging to malfeasant corporate executives, but lots of it was consumed by the malfeasant practise of using the investment money to shore up the fraudulent finances of the companies being mismanaged. It is irretrievably lost and lots of people are going to have to take a hit as a result.
In case you missed it, the people taking that hit are not the people who are getting the main benefit of the stimulus package, though they should be.